Booming U.S. Doughnut Franchise to Expand Overseas

Duck Donuts’ fun experience—guests can watch their doughnuts being made from batter to finished product—helped it become a business success.

A fast-growing U.S. doughnut franchise announced that it’s ready to conquer international markets as well, having recently signed a deal for growth in Chile.

Duck Donuts, which first opened in North Carolina’s Outer Banks in 2006, launched its franchise program in 2011 and has already grown to 65 franchise locations in the U.S. Its deal with OBX Alimentos SpA is for 10 locations in Chile over four years, with the first set to open by October.

Marcial Dieguez-Acuna, CEO of OBX Alimentos SpA and partner of investment firm Inversiones Rio Potomac Ltd, says he became a fan of Duck Donuts after taking his son to their local shop in Arlington, Virginia. Dieguez-Acuna lived in Chile for several years and helped run his family business there, and thought a premium doughnut brand would do well in the market.

“Doughnuts are not a staple of Chilean cuisine, but I was very surprised to see that Dunkin’ had gone from five to seven stores 15 years ago to over 80 in Chile now,” he says. “I realized doughnuts were going on now, and even at local supermarkets doughnuts were being sold.”

Dieguez-Acuna adds that Chile is a good market for American franchises because the country is so accustomed to U.S. brands. He says the major chains first moved into Chile in the ’90s, but now, just as in the states, consumers are demanding more premium options.

“People are looking for a better product; we’ve seen this in the burger industry over the last 15 years,” he says, pointing to concepts like Five Guys. “That same trend, I saw similarities in the doughnut business.”

Founder and CEO Russ DiGilio opened the first Duck Donuts in Duck, North Carolina, when he realized the Outer Banks didn’t have a good doughnut option. The brand specializes in made-to-order, customizable doughnuts in a laid-back, beach-themed environment.

Duck Donuts’ fun experience—guests can watch their doughnuts being made from batter to finished product—helped it become a business success, but it was the make-up of the local clientele that helped it become a franchise success. DiGilio says early franchise inquiries often came from regular beach vacationers.

“Most people in the beginning had an experience in the Outer Banks, and that’s how they learned about us,” he says. “And when they learned we were franchising, they would reach out to us.” That exposure to tourists is also why so many of the first franchise locations were in smaller markets, DiGilio says, like Williamsburg, Virginia, and Virginia Beach—cities where many locals travel to the Outer Banks.

Duck Donuts locations are now open or in development in 23 states. DiGilio says the brand has taken root not just as a breakfast destination, but as a lunch and snack option as well. Along with the made-to-order doughnuts, the menu includes doughnut sandwiches and even Donut Sundaes. There’s also a catering program.

“People are making us a part of their traditions. We do plenty of weddings, we do birthdays, and that’s morphed into business meetings and other things where we’re doing large group gatherings,” DiGilio says. “People come back because the experience is part of what we do. … It’s a bit of a show.”